So Far Away - Sending Western Canadian Natural Gas East for Export as LNG

For some time now, discussions about the possible development of Canadian liquefaction/LNG export terminals have focused on the Western Canadian coast in British Columbia––partly because most of Canada’s natural gas reserves are nearby in northeastern BC and in Alberta, and partly due to Asia being a primary LNG target market. . But it could be that liquefaction/LNG export projects in Eastern Canada may make more sense. In today’s blog, “So Far Away –Sending Western Canadian Natural Gas East for Export as LNG,” LNG Ltd.’s Greg M. Vesey considers the rationale for piping Western Canadian natural gas long distances to Quebec and the Canadian Maritimes for export as LNG.

Western Canada has vast reserves of natural gas that would be cost-competitive to drill for, produce and transport to market if only there was a new, incremental market for large natural gas volumes. This conundrum has been a frequent topic in the RBN blogosphere, and has been looked at from several angles. Most recently, in One Way or Another, we discussed the facts that natural gas producers in Alberta and BC have been struggling to replace markets in Ontario and the U.S. Midwest that they’ve been losing to Marcellus/Utica producers in recent years, and that––thanks mostly to the current-and-growing glut of worldwide liquefaction capacity (see Too Much, Too Little, Too Late)––no liquefaction/LNG export projects along the BC coast have advanced to Final Investment Decisions (FIDs) and construction. Getting approval for big new gas pipelines from BC and Alberta gas production areas to the BC coast has been another challenge. RBN blogs have also handicapped the leading BC projects (see Slip Sliding Away) and at the possibility of moving Marcellus/Utica gas through New York and New England to Canada’s New Brunswick and Nova Scotia provinces not only to meet in-province needs but to export as LNG (see Movin’ Out and Break on Through to the Canadian Side).

There is, of course, good logic behind the idea of moving Western Canadian gas to the nearby BC coast, super-cooling it into LNG and shipping it to major LNG consumers like Japan, South Korea, China and India. After all, there are only a few hundred miles between BC and Alberta gas production areas and prospective liquefaction/LNG export terminals along coastal BC, and the ocean voyage from BC to Asian buyers is several days shorter than it is from the U.S. Gulf Coast, where one liquefaction/export facility is in operation and others are under construction. But FIDs on BC LNG export projects so far have been stymied by the triple-play threat of high infrastructure costs, environmental concerns, and First Nation opposition. Even assuming that regulators’ environmental concerns and First Nation worries are addressed, the relatively high cost of BC LNG facilities––driven by the substantial pipeline, port and other infrastructure necessary and the challenges of building in unusually remote areas with rugged terrain––may relegate them to being too-expensive propositions. In other words, liquefaction/LNG projects that may have advanced in the LNG world that existed a few years ago (with LNG demand and prices rising fast) have far weaker prospects today. Something else has changed too: While Asia remains an important market, European, South American and even Middle Eastern markets for LNG have proven to be viable alternatives for North America LNG, as evidence by the number of LNG shipments from Cheniere Energy’s first Sabine Pass liquefaction plant in Louisiana to non-Asian markets.

All of which brings us to take a fresh look at three liquefaction/LNG projects being considered on Canada’s East Coast -- in the Canadian Maritimes and Quebec:  GNL Quebec’s Saguenay LNG in Quebec, Pieridae Energy’s Goldboro LNG in Nova Scotia, and LNG Ltd.’s Bear Head project, also in Nova Scotia. (Note to readers – the author of this blog is managing director and CEO of LNG Ltd.) Saguenay LNG would produce up to 11 million tonnes per annum (MTPA) of LNG, the equivalent of about 1.6 Bcf/d of gas, while Goldboro LNG’s capacity would be 10 MTPA (~1.4 Bcf/d) and Bear Head LNG would be either 8 or 12 MTPA (~1.1 to 1.7 Bcf/d), depending on the number of liquefaction “trains” built.

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